TT4D: Part 2 - Spinning Out Defense-Funded Innovations: A Guide for Researchers

by Jeff Decker, PhD and Nilay Papila, PhD Technology Transfer for Defense, Stanford University

Jun 25, 2025

In our previous post, we explored how faculty can transition defense-funded research from the lab to the defense and/or commercial market. Now that you’ve assessed your technology’s readiness and engaged your tech transfer office, it’s time to take the next step: building a venture. In this post, we’ll cover how to align your startup with defense mission needs and commercial market opportunities — while assembling the right team, leveraging programs like SBIR/STTR, and planning for real-world deployment.

Align to Mission & Market

Dual-use startups succeed by focusing on a specific mission need (e.g., contested logistics, energy resilience, etc.) while also scaling to commercial sectors like logistics or infrastructure. This “dual-use” positioning strengthens your value proposition to both investors and Defense Department funders. Show that your product can support a warfighter and have commercial legs.

Pro Tip: Consider how your startup could transition from a Phase II SBIR to a Defense Department pilot contract or OTA (Other Transaction Agreement) — these are fast paths to deployment and revenue.

Build Your Team and Plan Your Transition

Work with your Technology Transfer Office (TTO) early to clarify licensing, inventor roles, and understand licensing terms. Recruit a founding team that blends technical depth with operational and defense experience. Successful spinouts often begin by:

Clarifying IP ownership and inventor roles
Understanding licensing terms
Defining your role (e.g., part-time founder, advisor)

Build your team intentionally by ensuring you have the following individuals:

A technical founder (faculty or grad student PI)
A business/ops lead
A defense-experienced advisor or mentor

Tip: Explore national security accelerators like NSIN Foundry or FedTech — they pair researchers with entrepreneurs to build dual-use ventures.

Build Momentum, Not Just IP

TRL advancement doesn’t stop at spinout. Investors and defense funders want traction:

Customer engagement (letters of support, pilot MOUs)
Path to deployment—Defense acquisition or commercial launch

Tip: Include a “TRL Roadmap” in pitch decks and proposals — demonstrate where you are, where you’re going, and what support you need to get there.

Use the SBIR/STTR Program as a Bridge

SBIR/STTR provides up to ~$2M in non-dilutive funding and a path to pilot with the DoD. Many agencies — AFWERX, Army xTech, NAVSEA — offer startup-friendly SBIRs. Some allow PI transition from university to company between Phase I and II. SBIR/STTR can serve as a natural bridge between campus research and commercial/government readiness.

Tip: Engage the Topic Author or program manager listed in the solicitation early. This validates fit and aligns your proposal with real user needs. Doing so will enhance fit and increase your chances of success.

Why Transitioning to Commercial Matters in Defense

The Defense Department increasingly looks for transition-ready technologies, not just academic breakthroughs. Moreover, it is shifting from funding research to funding research outcomes. It wants capabilities, not just concepts. A well-planned spinout not only advances your research — it creates real-world value, agility, and access to funding streams that academia alone can’t provide. They want to see:

A viable path to operational use and
Commercial or dual-use potential as a signal of sustainability and scalability.

Takeaway

Spinning out is not just a business decision — it’s a continuation of your public mission. Success demands clear mission alignment, a capable team, and a roadmap to deployment. When you spin out your research into a company, you gain agility, focus, and access to new funding streams that universities alone often can’t tap into — like SBIR/STTR, venture capital, or defense primes looking for partners. By focusing on both defense and commercial applications, leveraging new funding streams, and demonstrating real traction, you position your venture for sustained impact and funding. With the right structure, team, and support, your research can leave the lab and start solving real defense and commercial challenges. It’s not just about starting a company — it’s about translating research into capability, creating value where it matters most.

Coming Next:

Using ChatGPT for Research Proposals
How to write a winning Defense Department SBIR proposal—step-by-step guidance from Phase I to Phase III.
Regulatory Considerations
- ITAR/EAR compliance for defense-related tech
- FDA, FAA, or DOE oversight depending on domain

___________________________________________________________________

Technology Transfer for Defense (TT4D) at Stanford University specializes in matching Defense Department funding with academic research projects. In the past six years, TT4D has worked with numerous faculty members at more than a dozen universities to help them win Defense Department grants and with the Office of Naval Research, totaling more than $13 million, to support research funding and transition academic technologies from lab to defense capabilities. TT4D is based at Stanford University and is run by Jeffrey Decker, PhD, program director, Precourt Institute for Energy, Fu-Kuo Chang, Professor of Aeronautics and Astronautics, and Nilay Papila, PhD, senior program manager, Precourt Institute for Energy. To contact the TT4D team, visit techtransferfordefense.stanford.edu.

To read previous TT4D posts, see:

StanfordH4D’s Newsletter

Discussion about this post